Question

A broker hired by a prospective tenant offers a landlord (owner) the following lease terms for two floors of 2,250 rentable square feet of office space. The broker's contract with the tenant requires a 4% commission be paid to them by a landlord whom they rent space from. How much total commission would the landlord owe the broker if the tenant signs a lease and pays their first month of rent with these terms. Term: 10 Years Rent: $25/ sqft (the way office rent is typically quoted) Enter your solution without a dollar sign and without decimal places (a whole number).

Answer 1

The landlord would owe the broker $45,000 in total commission for a 10-year lease of two floors of office space at $25 per square foot, calculated as 4% of the total lease value.

Step-by-step explanation:

To determine the total commission owed by the landlord to the broker, we need to calculate the total lease value for two floors of 2,250 rentable square feet at a rate of $25 per square foot per year, over a 10-year term. Afterward, we apply the 4% commission rate to the total lease value.

Step 1: Calculate Total Lease Value

Lease Value per Year = Rent per Sqft × Total Sqft

Lease Value per Year = $25 × (2 × 2,250)

Lease Value per Year = $25 × 4,500

Lease Value per Year = $112,500

Total Lease Value over 10 Years = Lease Value per Year × Number of Years

Total Lease Value over 10 Years = $112,500 × 10

Total Lease Value over 10 Years = $1,125,000

Step 2: Calculate Commission

Total Commission = Total Lease Value × Commission Rate

Total Commission = $1,125,000 × 0.04

Total Commission = $45,000

The landlord would owe the broker a total commission of $45,000 if the tenant signs the lease and pays their first month of rent with these terms.